In studying humoral regulation of hematopoietic cell growth, we have found that transforming growth factor beta has potent bifunctional effects. TGF beta1 and TGF beta2 are equipotent selective inhibitors of hematopoiesis that halt the growth of early human and murine progenitors but not more differentiated progenitors. Using purified murine hematopoietic stem cells in single cell assays with IL 3, it was shown that TGF beta acted directly on the cells to block growth. Primitive hematopoietic cells such as high proliferative potential colony forming cell (HPP-CFU) and CFU-GEMM and BFU-E were inhibited by TGF beta in vitro. Thus, the ability of TGF beta to block hematopoietic cell growth depends on the state of differentiation of the cell. In contrast, addition of TGF beta to GM-CSF stimulated bone marrow cells greatly augmented growth, leading predominantly to an increase in granulocytes. In vivo experiments with TGF beta show that the hematopoietic stem cells are reversibly prevented from entering the cell cycle. This growth inhibitory action functions on at least two levels: 1) trans-down modulation of the cell surface receptors for positive regulatory signals and/or interfering with post-receptor signalling of these molecules. Leukemic cell lines could be either sensitive or insensitive to TGF beta mediated growth inhibition. Growth of neoplastic B lymphocytes can occur by escaping from a TGF beta mediated autocrine inhibitory loop. Activation signals (e.g. phorbol esters) can inhibit tumor cell growth by stimulation of active TGF beta production and induction of cell surface expression of functional TGF beta receptors. These results suggest that TGFbeta may have utility as a bone marrow protective and as an anti-tumor agent.